20050414Gale direct.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC SERVICE
TO TAKE INTO ACCOUNT INCOME TAXES
IN COMPLIANCE WITH ORDER NO. 29601
CASE NO. IPC-05-
IDAHO POWER COMPANY
DIRECT TESTIMONY
JOHN R. GALE
Please state your name and business address.
My name is John R. Gale and my business
address is 1221 West Idaho Street, Boise, Idaho.
By whom are you employed and in what
capaci ty?
I am employed by Idaho Power Company Idaho
Power or the Company) as the Vice President of Regulatory
Af fairs.
Please describe your work experlence.
In October 1983, I accepted a posi tion as
Rate Analyst wi th Idaho Power Company.I was promoted to
Manager of Rates in 1991 and to General Manager of Pricing
and Regulatory Services in 1997.In March of 2001, I was
promoted to Vice President of Regulatory Affairs.As Vice
President of Regulatory Affairs, I am responsible for the
overall coordination and direction of the Pricing &
Regulatory Department, including development of
jurisdictional revenue requirements and class cost-of-
service studies, preparation of rate design analyses, and
administration of tariffs and customer contracts.In my
current position, I am responsible for policy matters
related to the economic regulation of Idaho Power Company.
What is the purpose of your testimony in
this case?
GALE, DI
Idaho Power Company
The purpose of my testimony in this case is
to present the rates and charges that should be put into
place on June 1, 2005 in order to comply wi th the
settlement of income tax issues approved by the Commission
in Order No. 29601.
Please describe Order No. 29601.
The Commission issued Order No. 29601 on
September 28, 2004 in Case No. IPC-03-13, the Company
last general rate case.The order granted the Joint Motion
for Acceptance of Settlement and approved the Stipulation
that memorializes the settlement agreement.Exhibi t 1 is a
copy of Order No. 29601.
Have you included a copy of the Stipulation
that accompanied the Joint Motion for Acceptance of
Settlement as an exhibi t in this case?
Yes.Exhibit 2 is a copy of the Stipulation
that accompanied the Joint Motion for Acceptance of
Settlement.The Stipulation was approved, without change,
in Order No. 29601.
What are the terms of Order No. 29601 that
must be addressed at this time?
First, Order No. 29601 recognizes that by
applying statutory income tax rates to the Company s test
year income, Idaho Power s Idaho jurisdictional revenue
GALE, DI
Idaho Power Company
requirement was increased by $11,504,677 above the level
set in Order Nos. 29505 and 29547.Second, f6r the period
of time June 1, 2004 through May 31, 2005, the Company was
directed to compute and record each month the addi tional
revenue the Company would have received, based upon an
incremental rate of $0.92209 per MWh, in a regulatory asset
accoun t that would accrue in teres t at the PCA carrying
charge rate, which was 1 percent during the relevant time
period.The regulatory asset account would be reversed
during the June 1, 2005 through May 31, 2006 time frame
simultaneously with a one-year rate adjustment to recover
the amount of the regulatory asset.Third, ongoing rates
to recover the $11,504,677 incremental income tax impact of
reflecting statutory income tax rates in the Company
revenue requirement would also become effective on June
2005.
Have you supervised the preparation of an
exhibit to show the accumulated regulatory asset amount
based upon the Idaho jurisdictional sales during the June
1, 2 004 through May 31, 2 005 per i od 0 f time, the $ 0 . 922 09
per MWh rate, and the 1 percent interest rate?
Yes.Exhibi t 3 shows the monthly
accumulation of revenues that would have been collected
from customers based upon actual Idaho jurisdictional sales
GALE, DI
Idaho Power Company
from June 1, 2004 through March 31, 2005, estimates of the
April and May 2005 Idaho jurisdictional sales, the $0.92209
per MWh rate, and the 1 percent interest rate.April and
May 2005 actual Idaho jurisdictional sales levels are not
known at the time of this filing.Exhibi t 3 shows a total
regulatory asset of $11,638,229 to be recovered from June
1, 2005 through May 31, 2006.
What rate design are you proposlng for the
one-year rate adjustment?
I propose applying a uniform percentage
increase to each customer class wi th a uniform cents per
kilowatt-hour wi thin each class.
Have you computed class specific rates that
will allow the Company to recover the $11,638,229
regulatory asset amount?
For purposes of one-year adjustments,Yes.
such as PCA computations, the Company estimates the next
year s Idaho jurisdictional sales.Thi s year the Company
estimates that the June 1, 2005 through May 31, 2006 Idaho
jurisdictional sales level will be 12,453,880 MWh, which is
the normalized Idaho jurisdictional firm sales updated to
year-end 2004.In order to arrive at a uniform percentage
increase by class, the $11,638,229 regulatory asset was
allocated to classes based upon revenues associated wi
GALE, DI
Idaho Power Company
the estimated June 1, 2005 through May 31, 2006 Idaho
jurisdictional sales level.The allocated revenue lncrease
was then divided by class specific sales values to arrive
at class specific rates.Exhibit 4 details the class
specific rates which result from this computation as well
as the revenue impact for each class.
Because you have estimated April and May
2005 Idaho jurisdictional sales for purposes of quantifying
the regulatory asset and because you have estimated the
June 1, 2005 through May 31, 2006 Idaho jurisdictional
sales for determining the appropriate one-year incremental
energy rate to recover the regulatory asset, do you have a
proposal to address any under-collection or over-collection
of the appropriate regulatory asset?
Yes.First, I recommend that the Company
provide quantification of the actual regulatory asset
account accumulation as of June 1, 2005.Second, I
recommend that the Company track the collection of the
regulatory asset in a manner similar to PCA true-up revenue
collection tracking (the true-up of the true-up) .Finally,
I recommend that any difference in actual revenue
collection greater than or less than the regulatory asset
be added to the true-up of the true-up balance in next
year s PCA computations.I recognize that this amount is
GALE, DI
Idaho Power Company
not a PCA item; however, the true-up of the true-
provides a convenient mechanism for clearing the account
and the amount should be relatively small.
What rate design are you proposing for the
ongoing rate adjustment?
I propose applying a uniform percentage
increase to each customer class with a uniform percentage
increase to
applicable.
incremental
the demand and energy bi 11 ing components where
Have you determined the appropriate
rate adjustments necessary to recover the
$11,504, 667 of incremental revenue requirement associated
with statutory income tax rates on an ongoing basis?
Yes.The appropriate incremental rate
associated wi th the ongoing income tax adjustment was
derived by allocating the $11,504,667 on a uniform
percentage basis to each customer class based upon revenues
associated with the 2003 test year used in the Company
last general rate case.An adj us tmen t was then made on a
uniform basis to both the demand and energy components,
where applicable, to recover the allocated revenue.
Exhibi t 5 details the revenue impact by customer class of
the ongoing rate adjustment.
Have you prepared an exhibi t that shows the
GALE, DI
Idaho Power Company
combined impact to customer classes of both the one-year
tax adjustment and the ongoing adjustment?
Yes.Exhibi t 6 details the combined impact
to each customer class of both tax adjustments.In order
to show the impact of both adjustments on a comparable
basis, the impact to customer classes is reflected in
Exhibit 6 utilizing the sales from the 2003 test year.
Have you prepared tariffs that reflect both
the one-year rate adjustment and the ongoing rate
adjustment.
Yes, Exhibit 7 includes the Company
tariffs reflecting the combined impact of both tax
adjustments.The tariffs are provided both final"and
" legislative format
Does this conclude your tes timony?
Yes,does.
GALE, DI
Idaho Power Company